Capital Mobilization: Awaiting Guidelines!

In other countries, a company has the right to claim for damages outside a contract if the governing agency fails to promulgate legal documents on time, resulting in delays of business, or limit investment rights given by law

In other countries, a company has the right to claim for damages outside a contract if the governing agency fails to promulgate legal documents on time, resulting in delays of business, or limit investment rights given by law

In late 2010, Company X submitted its application for charter capital increase in the form of issuing separate shares under Decree 01/2010/ND-CP dated January 4, 2010 (Decree 01) to a provincial department of planning and investment, but the department did not accept the application, for the reason that there was no guidance from the Ministry of Finance.

Since then, the company has tried to re-submit the application several times but received the same answer “no guidance yet” from officers of the business registration office. Company X is not the only one to be in such situation.

Similarly, with the presence of Decree 90/2011/ND-CP dated October 14, 2011, regulating the issuance of separate bonds (Decree 90), companies are no longer able to issue bonds under Decree 52/2006/ND-CP dated May 19, 2006. They are now obliged to notify and register their issuance of convertible bonds and secured bonds under the guidance of the Ministry of Finance. Thus, this channel of capital funding must cease because of “no specific guidance.”

Legal responsibilities and law invasion

The decree prescribes in detail the types and methods of issuance, rights and obligations of investors and the responsible governing agency for this form of capital mobilization. However, the trouble is the decree dictates that the Ministry of Finance is obliged to produce a guiding circular on the implementation of this decree while it fails to set up a time limit as well as legal responsibilities if the Ministry of Finance delays the issuance of such guiding documents.

Moreover, there is no indication of liabilities for such delays from a Government agency, under the current law and regulations, and this has somewhat limited the rights to operate and do business of companies, making the investment environment less attractive and leading to law invasion among investors.

However, law evasion is not always smooth, especially when the current legal system requires a lot of complicated administrative procedures. Investors have to take risk in carrying out various complex transactions before reaching the goal of capital mobilization, and they have to face the issues of information transparency, business registration records and filing system.

Compensation, why not?

In countries like Japan, a company has the right to claim for damages outside a contract if the governing agency fails to promulgate legal documents on time, resulting in delays of business, or limit investment rights given by law.In this case, companies must provide evidences of their damages and losses as the direct consequences of the delay or neglience of the government agencies. Lawmakers in such countries have anticipated all the posibilities for biding obligations and liabilities to the relevant state agencies.

In Vietnam, there is not precedent for a company to sue government agencies for damages if they are irresponsible and delay their duties. This is a question that needs to be answered soon.